Sex Abuse Statute of Limitations Amendments Challenge Insurers

Sexual abuse scandals, especially involving clergy, continue to sweep the nation capturing widespread media attention. Within the last month, lawsuits have been filed against Roman Catholic Archdioceses in Illinois, Philadelphia, and Wisconsin.

Recently, Virginia passed an amendment to the statute of limitation for filing childhood sexual abuse cases. The amendment, passed unanimously, goes into effect on July 1, 2011, posing significant coverage and investigative challenges to insurers of churches, daycare providers, schools and youth organizations.

Ryan Smethurst, a partner in McDermott Will & Emery LLP’s insurance disputes group, describes a similar law enacted in late 2002 in California. It allowed for previously time-barred childhood sexual abuse cases to be filed if done so within 2003.

“In some respects, Virginia’s [law] is more open-ended because there’s no one year filing window, but in California the legislative change prompted roughly 1,000 lawsuits against Catholic identities statewide.”

Smethurst, whose firm represented liability insurers of the Los Angeles Archdiocese and the Diocese of Orange County with respect to the 2003 cases, continues, “When states relax the statute of limitations for old cases such as what happened in California and now what’s happened in Virginia…the cases can be very hard to defend because oftentimes the perpetrator of the abuse is deceased, other witnesses may also be deceased or aged, and as a result often there isn’t much tangible evidence for the defendants to present to defeat the plaintiff’s claims.”

The new law extends the time frame in which to file a case. Currently, a plaintiff claiming childhood sexual abuse needs to file suit within two years of turning 18. The new law gives plaintiffs 20 years from the age of 18 or from the recollection of the abuse to file suit.

“On either of those two bases, this is a substantial relaxation of the statute of limitations for sexual abuse claims in Virginia”, says Smethurst.

The difficulty in investigating childhood sexual abuse claims lies in determining what type of evidence can be provided on decades old claims. Sometimes churches will retain documents relating to supervision and personnel management.

“Discovery of those types of documents is hotly contested in the Catholic cases, but typically the plaintiffs do get access to much of that information. So where there are documents, they are crucial. Where there are not, it often comes down to the credibility of the plaintiff and any surviving witnesses”, adds Smethurst.

Treatment records and prior allegations involving the same perpetrator can be important considerations.

“The parties often dispute the importance of psychological records, which may or may not confirm the fact of abuse”, says Smethurst.

Churches aren’t the only target defendants, Smethurst points out. Common defendants in childhood sexual abuse cases include public and private schools, daycare providers, youth organizations, as well as religious groups.

“The Roman Catholic Church certainly could be said to be a lead defendant in these cases. Those cases tend to get the most publicity. It’s also important to note that the Virginia legislation is not specific to any type of defendant, so this emerging problem in Virginia is a concern for insurers of schools, religious or otherwise, daycare facilities, and other entities entrusted with child care.”

Though most insurance policies written after 1986 exclude sexual abuse, especially those specifically underwritten for churches and schools, Smethurst says that when the relaxation of the statute of limitations is as broad as it is in Virginia, cases based on alleged abuse earlier than 1986 can be timely brought. Those pre 1986 policies are unlikely to have sexual abuse exclusions.

“So that’s not to say that carriers don’t have strong coverage defenses in these cases. They often do. But those coverage defenses are not as clear cut as they would be with a policy with a sex abuse exclusion. In other words, carriers are left with arguments about expectation of injury or intentional injury, arguments that, depending on the facts, may or may not carry the day with respect to an entity responsible for supervising an alleged perpetrator of abuse, for example an employer.”

Smethurst points to a host of coverage issues that can come into play that include such questions as which policies are triggered, how many self insured retentions might apply to a situation of continuing abuse or abuse of more than one child, and whether there is coverage for punitive damages.

“In our experience these cases raise a host of issues not unlike complex insurance coverage litigation relating to, for example, environmental or asbestos litigation. Many of the same policy provisions and disputes between policyholders and carriers and among carriers exist in these cases.”

Despite the significant broadening of the time period in which to file a sexual abuse claim, Smethurst admits he would be surprised if the Virginia filings rose to the level that was experienced in California in 2003.

“I have to believe that Virginia litigation will have less volume to it. Having said that, this new legislation is a dramatic revision to the statute of limitations, so it’s quite possible that there are individuals who have been waiting for this change and are ready to file when the law takes effect in July. It’s difficult to say, frankly, how many lawsuits will be filed and over what period, but certainly the legislative landscape has changed.”

In the end, Smethurst says childhood sexual abuse claims are difficult for all involved.

“These cases are difficult for all sides. They’re difficult for the plaintiffs emotionally and psychologically. They’re difficult for the defendants. Oftentimes the older the case is the more difficult it is for the defendants.”

Insurers face tough obstacles in trying to investigate and determine coverage in these types of cases.

“They’re difficult for the insurers as well because, as we saw in California, many of the insurers’ coverage defenses are tied to the level of knowledge and expectation of injury that the insurers can prove the defendants had. So, in some respects there is an odd marriage between commercial insurers and the plaintiffs with respect to discovery of the level of that alleged knowledge. That places insurance companies which have duties to their insureds in a difficult position with respect to their investigation of the facts and circumstances and their need to act in accordance with their duties to their insureds”, says Smethurst.